> Is Property Renovation the Route
to Becoming a Property nnnnnnnnnnnMillionaire?
recent years there has been significant media attention
on property renovation and the way in which it can
transform investors into property millionaires.
However, property is a huge investment, and failure
to plan the project carefully could result in bankruptcy.
Choosing Your Property
When investing in property, it is important to select
the property and the area in which the property
is located, carefully. This will require thorough
research. If you buy the property through an estate
agent, they will be able to tell you about the area,
for example what the local schools, hospitals and
GPs, roads and public transport are like, however,
if you choose to buy property at auction, you may
need to conduct more independent research. Mouseprice.com
provide area guides (by postcode district) with
information about the housing stock of the area
as well as demographic information. These guides
provide useful reference information, and indicate
who your market might be if you later choose to
sell or rent out the property.
The Renovation Project
Before embarking on a project you must be aware
of the work involved. Will it essentially be a refurbishment
project or will it require full structural renovation?
Prior to making an offer, most property investors
or property developers would get a survey done by
a reputable chartered surveyor. The result of this
survey would then allow the property developer to
make an informed offer. It may also be sensible,
at this stage, to invite relevant tradesmen, such
as builders, plumbers and electricians to provide
quotes for the work they would provide. Also make
sure you are aware of potential structural limitations
of the building – has the property been refused
planning permission in the past? Which are the supporting
Finance and Budgeting
The first rule of organising the project budget,
is to be realistic. It may be a good idea to spend
evenings and weekends painting and wallpapering
to save money that would otherwise be spent on painters
and decorators, but expecting to use your first
property development project as an opportunity to
teach yourself to plaster might end in disaster.
It is generally advisable to leave skilled jobs
to the professionals. Similarly, think realistically
about how much time you have – don’t
take on so much work that it will negatively affect
your quality of life.
Depending on the scale of the renovation project
you may not be able to live in the property whilst
the work is being undertaken. This means that you
will be responsible for paying the rent or mortgage
on the property which you live in and the mortgage
on the property that you are renovating.
Again, depending on the size of the project you
may wish or need to employ an architect and a project
manager. Although this would represent a significant
cost in the short term, in the long run it may make
the project run much more smoothly and save time
and money later on.
Remember to include your own tool kit in the budget!
Most importantly, have an adequate contingency fund.
If the project was to overrun by 2 months, would
you be able to afford the additional rent? Having
a realistic schedule for the timing is essential,
as more time spent on the project, means more money
spent on the project.
Time and budget planning are inextricably linked
– the longer a project goes on for, the more
it is likely to cost. To plan your budget accurately,
be realistic about how long the property development
is likely to take, (not how long you want it to
take!), from viewing and buying the property and
exchanging contracts, to being in a position where
the property can be put on the market.
How much will it infringe on your current lifestyle?
If you are planning to manage the project as your
‘day job’, can you afford to live without
any income whilst the project is underway? If you
are planning to continue with your current job whilst
the project is underway, can you afford any necessary
time off work to oversee events, wait for deliveries
and let in builders? etc.
The growth of the property market and property renovation
as a means to financial stability is featured on
so many television programmes that it could be seen
as a flawless way for up and coming entrepreneurs
to increase their pension in the form of property.
However, it is essential to conduct the proper research
before embarking on any project and manage the project
in a professional manner. It may be tempting to
snap up a bargain property, only to realise later
that the price reflected the amount of work that
needed doing. Research and planning will not eliminate,
but it will reduce the possibility of ending up
with a half finished empty property, and a hefty
credit card bill! Remember, an investment can return
less than the initial payout just as easily as itcan
turn a profit.